Telematics has rapidly transformed the landscape of the insurance industry by collecting real-time data on vehicle performance, driver behavior, and vehicle location. This data allows insurers to uncover deeper insights into risk factors and safety metrics that were once difficult to quantify.
This article explores how telematics is revolutionizing risk scoring, influencing insurance rates, and driving decisions for underwriters and claims managers, specifically in the motor carrier industry. We’ll examine the advantages of telematics data, discuss its implications for insurers and motor carriers, and take a look at the future trends shaping this powerful tool. Whether you’re a fleet operator or an insurance professional, understanding these shifts is essential to staying competitive in a data-driven market.
Benefits of Telematics for Insurers
With telematics, underwriting moves from a “one-size-fits-all” approach to a model where policies can be customized for each motor carrier’s unique risk characteristics. For example, telematics can tell you how often a fleet operates in urban areas during peak traffic hours, which can be factored into its overall risk profile. It’s also possible that some carriers might exhibit consistently safe driving behaviors, which could make them eligible for reduced premiums or other incentives.
In this section, we will examine more ways telematics benefits insurers and enhances their underwriting ability by:
1. Preventing Premium Leakage
2. Enhancing Risk Assessment
3. Boosting Client Retention
4. Streamlining Claims and Enhancing Fraud Detection
5. Accelerating Growth Through Increased Efficiency
1. Preventing Premium Leakage
Telematics technology enables underwriters in the motor carrier industry to combat premium leakage by providing precise, real-time data on vehicle usage and driver behavior. For instance, telematics can accurately track mileage, ensuring that premiums reflect actual vehicle use rather than relying on potentially underreported estimates. This accuracy helps prevent losses and possible coverage declinations due to misreported information.
According to an article by ForMotiv, premium leakage cost the U.S. property and casualty insurance industry between $29 billion and $36 billion in 2022. It also accounted for up to 10% of an insurer’s loss and loss adjustment expenses. By leveraging telematics data, underwriters can enhance risk assessments, set appropriate premiums, and reduce the financial impact of premium leakage overall.
2. Enhancing Risk Assessment
Traditionally, insurers have relied on historical data like demographics, class of vehicles, and historical accident statistics or safety scores to determine rates. When insurers use telematics, they can collect even more data in near real-time to gain a clearer understanding of a company’s operational dynamics and commercial auto exposure. This includes data on average speed, travel routes, braking behavior, and other key metrics.
Having more data enables insurers to more accurately assess and rate risks based on exposure, providing tailored pricing that reflects the safety and operational practices of fleets, whether they have safer or riskier drivers.
3. Boosting Client Retention
Traditional data collection methods provide valuable insights into operational behaviors. By highlighting safety scores or identifying areas with frequent violations, clients can pinpoint opportunities for improvement. This not only helps them mitigate risks but can also contribute to stopping their insurance premiums from rising, ultimately supporting stronger client retention.
With telematics, insurers can provide their clients with deeper insights, such as identifying drivers who may be speeding, braking excessively, or taking higher-risk routes. By enabling fleets to focus safety coaching on the drivers who need it most, telematics helps clients improve their operations and reduce risks—strengthening their relationship with insurers and improving retention through demonstrated value and result.
4. Streamlining Claims and Enhancing Fraud Detection
Telematics plays a crucial role in claims management, fraud prevention, and first notice of loss (FNOL) by providing real-time data on driving events, vehicle location, and incident specifics. When an accident occurs, telematics data can offer an accurate timeline and context, such as speed, braking patterns, and time of day – enabling claims adjusters to quickly verify details, assess liability, and initiate the FNOL process efficiently.
These insights reduce claim processing time and lower costs by identifying fraudulent claims early. For instance, if telematics data reveals that a vehicle was parked at the time of an alleged accident, it can signal potential fraud. By providing transparent, verifiable data, telematics streamlines claim handling, supports fair assessments, and ultimately helps reduce unnecessary payouts and improve insurer-client trust.
5. Accelerating Growth Through Increased Efficiency
According to a report by Fortune Business Insights, “The [telematics] market is projected to grow from USD 85.95 billion in 2024 to USD 170.35 billion by 2032, exhibiting a CAGR of 8.9% during the forecast period.” This rapid growth highlights the increasing value insurers place on telematics and that insurers are adopting telematics into their workflows at a fast rate. By integrating telematics into workflows, insurers and underwriters can innovate faster, respond to market demands, and deliver greater value to policyholders.
“The [telematics] market is projected to grow from USD 85.95 billion in 2024 to USD 170.35 billion by 2032, exhibiting a CAGR of 8.9% during the forecast period.”
Benefits of Telematics for Motor Carriers
Telematics offers motor carriers a powerful tool for reducing costs, improving safety, and enhancing their overall operational efficiency. By using real-time data on vehicle locations, speed, braking, and other driving behaviors, carriers can gain valuable insights into driver performance and fleet risk.
In this section, we will examine more ways telematics benefits motor carriers and their operations by:
1. Improving Fleet Safety
2. Reducing Fuel Costs
3. Enhancing Fleet Management
1. Improving Fleet Safety
Drivers who actively engage with telematics systems tend to improve their safety performance. According to a study by Cambridge Mobile Telematics, they found that the riskiest and most engaged drivers decreased their distracted driving time by 20%, decreased speeding time by 27%, and reduced hard braking incidents by 9%.
The Federal Motor Carrier Safety Administration also conducted a study where it was found that drivers who were aware that their driving performance was being monitored were more safety conscious behind the wheel. By adopting telematics and improving their driver’s safety performance, fleets can improve their safety scores, which can help them find more clients and reduce their insurance premiums.
2. Reducing Fuel Costs
According to the same FMCSA study that found telematics improved drivers’ safety performance, it also discovered that the safety benefits associated with driving behavior also benefited the fuel economy for the truck. This finding is backed by another study conducted by the Massachusetts Institute of Technology, which shows that aggressive driving behavior can lower fuel economy by 15%-30% at highway speeds and 10%-40% in stop-and-go traffic.
Adopting telematics in your fleet can reduce fuel costs by improving driver behavior. With telematics, you can see which drivers tend to speed or brake and accelerate suddenly. From there, you can coach and train these drivers to help them improve their driving performance and therefore their fuel economy as well.
3. Enhancing Fleet Management
Telematics isn’t just for tracking a driver’s location and behavior, it can also help fleets with smarter, more proactive fleet management by monitoring vehicle health and alerting managers to maintenance issues before they become costly problems. Through real-time data on engine performance, tire pressure, brake wear, and other critical systems, telematics can detect early warning signs of potential failures, allowing fleets to schedule maintenance at the optimal time before those potentials equipment issues become reality.
This proactive approach minimizes unexpected breakdowns, reduces downtime, and helps avoid emergency repair costs. With detailed insights into vehicle conditions, fleet managers can make data-driven decisions to extend vehicle life, enhance driver safety, and reduce operational costs.
Future Trends in Telematics for the Motor Carrier Industry
As technology advances, telematics is transforming beyond tracking and monitoring, becoming a critical tool for predictive risk management and motor carrier efficiency. Here are some future trends to be on the lookout for in the motor carrier industry:
Artificial Intelligence and Machine Learning
AI and machine learning are revolutionizing telematics by creating predictive risk models that anticipate potential safety issues before they occur. These technologies analyze patterns in driver behavior, vehicle performance, and environmental factors to identify risks and give both insurers and motor carriers invaluable insight into a fleet’s operations.
According to an article on Progressive’s competitive prices by Carrier Management, telematics data has been found to be the most predictive rating variable for Progressive, with significantly more predictive power than traditional rating factors. The data shows telematics has more than twice the predictive power of any other insurance rating factor.
As AI continues to improve, its collaboration with telematics is sure to grow even more and help insurers find new ways to make a fleet’s risk profile even more accurate.
Policy and Regulatory Implications
As telematics technology advances, policy and regulatory frameworks are evolving to address critical issues around data use, privacy, and safety compliance. That will most likely include new regulations or adjustments to current regulations that govern how telematics data is collected, stored, and shared, ensuring that both motor carriers and drivers are protected.
One way that some telematics companies are addressing that is with “opt-in” solutions. For example, TruckerCloud, a new partner of Fusable and the leading telematics platform for commercial auto insurance, gives motor carriers the opportunity to share their telematics data with insurers. That means they can choose to give insurers access to their data, and that access can be revoked at any time. Though there are numerous benefits to motor carriers sharing this data with insurers, it still gives motor carriers full autonomy over their private information.
Another way is by providing the same data to both parties to improve data transparency. For example, Fusable provides additional motor carrier insights to both insurers and motor carriers themselves, such as CSA scores, giving insurers the information they need to write accurate policies and motor carriers the information they need to improve their safety performance and lower their insurance costs.
Conclusion
Telematics is reshaping the motor carrier and insurance industries, enabling both insurers and fleets to leverage data for more accurate risk assessment, personalized policy pricing, and proactive fleet management.
For insurers, telematics can benefit the underwriting process in a number of ways including reducing premium leakage, lowering fraudulent claims, and increasing client retention. For motor carriers, telematics can provide different benefits, such as enhancing fleet safety, lowering fuel costs, and reducing insurance premiums.
Emerging technologies like artificial intelligence are further enhancing telematics, expanding its potential for predictive risk management and setting new standards for operational efficiency and safety. However, with these advancements comes the need for evolving regulatory frameworks to ensure responsible data use and privacy. Staying informed and adaptable in this dynamic landscape is crucial for carriers and insurers alike as they strive to remain competitive and deliver greater value.
